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UK consumer confidence weakens on inflationary pressures

Staff Writer |
British consumer confidence decreased in the three months ended March as rising price pressures damped consumer spending, results of a survey by the professional services firm Deloitte showed.

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The consumer confidence index dropped to -7.0 in the first quarter from -6.0 in the fourth quarter of 2016, the latest Deloitte Consumer Tracker survey showed.

Despite this, the index remained in line with the three-year average, the report added.

The survey was carried out online by market research company YouGov among more than 3,000 UK adults aged 18 plus between March 17 and 20.

Out of the six components, four contributed negatively to the overall index in the March quarter. Confidence in disposable income, in particular, fell by 3.0 percentage points to reach -17, its lowest level in over two years.

"Since the EU referendum, consumer spending has been holding up well, but with inflation rising and nominal wage growth starting to slow, consumers are beginning to feel a squeeze on their disposable income" Deloitte economist Ian Stewart said.

Inflation overshot Bank of England's target of 2% in March to hit 2.3%, the highest in more than two years.

"There are already some signs that these pressures are contributing to a slowdown in consumer activity," Stewart added.

The economist expects record levels of employment and low interest rates to help the UK avoid a sharp drop in consumer spending.

While essential spending remained strong in the first quarter, discretionary spending returned to negative territory, the survey showed.


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